Skip to content

How Innovative Is China?


Thursday, July 26, 2018

China patents
Thinkstock/XtockImages

A few years ago, China overtook the U.S. and other innovative countries in terms of patent applications. More recently, it also became the leader in patent grants. But does this mean China is now the world leader in innovation? A recent Economic Synopses essay explores this idea.

Economist Ana Maria Santacreu and Senior Research Associate Heting Zhu noted that the number of patent applications is imperfect for measuring innovation, as it doesn’t account for quality.

“To assess whether these trends imply that China is becoming an innovation leader, we need to look beyond the number of patents that China files through patent offices and evaluate their quality,” the authors wrote.

Santacreu and Zhu examined patent quality from three angles:

  1. Patent grants, as approval requirements are typically higher than application requirements
  2. Patent categories, which include highly innovative “invention” patents and lower-quality “utility model” and “design” patents
  3. International patent applications, which can signal higher-quality intellectual property

Patent Grants

China had more patents granted than Japan, the U.S., Germany or South Korea in 2015 and 2016. However, its ratio of patents granted to patent applications was the lowest of the countries studied.

Between 2000 and 2016, 23.4 percent of patent applications in China were granted, notably lower than the ratios for the other countries:

  • 50.5 percent in Japan
  • 45.5 percent in South Korea
  • 44.9 percent in the U.S.
  • 43.5 percent in Germany

“Therefore, despite the significant increase in the number of patents granted, China still lags behind other innovative countries in its ‘success’ ratio,” Santacreu and Zhu wrote. The authors pointed out that the standards to grant a patent differ across patent offices. In this case, if the patent office in China were more willing to grant patents than the patent office in the U.S., looking at patent grants would not be indicative of the quality of the patent.

Patent Category

Over the period 2000-16, China’s higher-quality invention patents accounted for only 19.3 percent of the total grants, compared with 44.5 percent for utility model patents and 36.2 percent for design patents.

“These numbers imply that the actual technological improvement in China is not significant compared with its skyrocketing number of patent applications,” Santacreu and Zhu noted.

International Patent Applications

The authors also noted that China lags behind other innovation leaders in terms of patents filed and granted abroad. They illustrated this difference by contrasting China with the U.S.

In 2016, 4.2 percent of China’s patent applications were filed overseas, and 6.3 percent of the total patents were granted in foreign countries. The U.S., on the other hand, saw 43.4 percent of its patent applications filed overseas, and 48.1 percent of the total patents were granted in foreign countries.

“One explanation could be that the United States has a larger incentive to protect its intellectual properties abroad compared with China,” Santacreu and Zhu wrote. “Another explanation could be that many Chinese patent applications could not withstand the international evaluation because of the lower quality of its patents.”

Conclusion

The authors concluded that China still has room for improvement, though it is quickly catching up to global leaders in innovation. “If China sustains its large innovation investment and shifts its focus from quantity to quality, together with an improvement in intellectual property rights, the likelihood of becoming one of the next innovation leaders could be much higher,” they wrote.

Notes and References

1 The authors pointed out that the standards to grant a patent differ across patent offices. In this case, if the patent office in China were more willing to grant patents than the patent office in the U.S., looking at patent grants would not be indicative of the quality of the patent.

Additional Resources

Posted In Output  |  Tagged ana maria santacreuheting zhuchinainnovationpatentspatent applicationspatent grants
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.